Korean shipbuilder agrees to a deal that could bring more jobs to Philadelphia

The world’s largest shipbuilder, HD Hyundai Heavy Industries Co. Ltd. of Ulsan, South Korea, has signed a deal to seek U.S. government shipbuilding and maintenance contacts in alliance with Philly Shipyard Inc., which employs around 1,000 at the former Philadelphia Navy Yard site in South Philadelphia.

An agreement to “explore a potential business relationship” for government work was signed April 12 by Won ho Joo, chief executive of HD Hyundai’s naval and special ship unit, and Steinar Nerbovik, who has run the Philly yard since 2014 on behalf of its owner, Norway-based Aker ASA.

The deal announced this week follows a February visit by U.S. Navy Secretary Carlos Del Toro to Korean shipyards where he invited owners to invest in U.S. shipyards to build for military and civilian clients. The U.S. Navy and civilian agencies are showing increased interest in new watercraft, including seagoing drones like the ones used in the war in Ukraine. HD Hyundai on April 14 announced a partnership with Palantir, a U.S. security tech company, to develop unmanned military surface craft for reconnaissance and combat.

The Philadelphia yard used HD Hyundai designs and know-how in the past to provide U.S.-built tankers and other commercial ships for use between U.S. ports as required under the federal Jones Act, which has kept a handful of U.S. shipbuilders busy despite lower costs at competing shipyards in East Asia. The Philadelphia yard has been a leading beneficiary of the Jones Act since state financing lured Aker to the former Navy site in the 1990s.

The yard “has plenty of work, and they’re hiring, if you know anyone who wants to be a welder or machine operators,” said Louis Agre, head of the labor union group that represents workers at the yard.

HD Hyundai rival Hanwha Ocean had also talked to Philly Shipyard about joining forces, according to Korean news accounts. Hanwha has also shown interest in buying Australia-based Austal, which would have given the company a U.S. foothold by including Austal’s Alabama shipyard, Breaking Defense reported.

After a slow period in the late 2010s, the Philly yard now has a backlog of orders, including LNG-fueled container ships, “rock ships” to service offshore wind-powered electric generating turbines, and sophisticated training ships for the U.S. Merchant Marine.

Members of Congress have warned that shipbuilding, steel, and other key U.S. industries have shrunk in recent decades, leaving the military reliant on cheaper foreign suppliers, including China, a strategic rival. President Joe Biden has spoken against plans by Pittsburgh-based U.S. Steel to sell that company to Japan’s Nippon Steel Corp., though other officials have been less critical of the deal, noting that Japan, like South Korea, is a U.S. ally, and allies’ investments can buy upgrades for U.S. plants that domestic owners won’t or can’t finance.

HD Hyundai says it is also working with Lockheed Martin, which employs hundreds at its military contracting sites in Moorestown and King of Prussia, on a combat-systems modernization project.

The Philadelphia area’s helicopter makers — Boeing in Ridley Park, Leonardo in Northeast Philadelphia, and Piasecki in Essington and Coatesville — are similarly reviewing plans for unmanned aircraft, as are parts suppliers. The region is also home to a constellation of small unmanned-craft developers, including waterborne, airborne, underground, and surface drone makers.

The shipyard operates in a portion of the former Philadelphia naval base, which closed in 1996. Two of the former Navy Yard dry docks are in use by other companies, including locally-owned Rhoads Industries and the Philadelphia Ship Repair Co., a unit of Boston-based North American Ship Repair, which has been in talks to sell operations to potential buyers including Rhoads, according to industry sources. North American and Rhoads didn’t return calls seeking comment.

Philadelphia Ship Repair has notified the Pennsylvania labor department it plans to close by June 30, laying off 58 workers.

HD Hyundai was founded by Chung Ju-yung, the same industrialist who founded Hyundai Motor Co., which makes cars, trucks, and SUVs.

A division of the vehicle company, Hyundai Rotem, had a railcar manufacturing plant in South Philadelphia from 2008 to 2018, when it closed after SEPTA chose to bypass the local employer in favor of a planned China-owned factory in Massachusetts. That contract was later canceled after years of delays.